PepsiCo’s third-quarter results have narrowly beaten market expectations in both revenue and earnings, despite tough trading in its key North American businesses.
Net revenue for the quarter ticked up 2.6% to $23.9bn, slightly above analyst estimates. Adjusted earnings per share likewise squeaked past estimates of $2.26-2.27 at a reported $2.29.
PepsiCo’s better-than-expected results came despite a 4% drop in organic volumes at its troubled North American food and beverage businesses (PFNA and PBNA), alongside a 5% drop in organic volumes sold by its international beverages franchise.
PepsiCo’s earnings beat will be a welcome reprieve for a management team under the spotlight since activist investor Elliott Management intervened publicly in PepsiCo’s direction in early September.
Elliott had criticised PepsiCo as underperforming, citing “poor operational results, sharp stock price underperformance, and a meaningfully discounted valuation”.
The hedge fund encouraged management to refranchise its US in-house bottling operations – as Coca-Cola did successfully from around 2014–2017 – and cut loose less profitable brands and business units, while investing in core growth areas.
Read more: Why Elliott intervened in PepsiCo
PBNA’s operating profit performance in Q3 was the worst of all PepsiCo business units, falling a headline 20% on Q3 2023. Even when adjusted for one-off items and foreign exchange translation, it still fell 7%, contributing to a total fall in operating profit of 2%.
Pepsi has also named a new chief financial officer, who will succeed 30-year Pepsi veteran Jamie Caulfield after his retirement next year.
Steve Schmitt will join PepsiCo from Walmart US to take up the role in November 2025.
Joining Walmart in 2016, Schmitt played an important role in the transformation of the company into an omnichannel retailer, and will bring with him “critical expertise that aligns with PepsiCo’s growth strategy”, according to PepsiCo chairman and CEO Ramon Laguarta.
“Steve’s experience working with complex supply chains, adapting to the dynamic retail landscape and omnichannel consumers, and delivering operational excellence on a large scale will be impactful at PepsiCo,” he said.
“He will play a crucial role as we accelerate growth, optimise our cost structure, and create greater value for our shareholders.”
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